Poland’s Monetary Policy Council is expected to keep the National Bank of Poland policy rate unchanged at 3.75% at its 7 October meeting, with November flagged as the earliest point for any shift once a new set of macroeconomic projections is available. Current expectations point to two 25bp rate rises in the first quarter of 2027, reflecting ongoing inflation risks and a preference to reassess policy with updated forecasts.
Inflation rose to 4.0% year on year in September, while government intervention in the fuel market is set to subtract 0.7 percentage points from CPI; even so, inflation is projected to remain around the upper end of the tolerance band around the target in coming months. A third fuel-market measure—lower excise duty and VAT through end-2026—lowers the projected inflation path and nudges it back towards that upper range, implying a near-zero real interest rate in the short term alongside an extended period of elevated commodity prices and inflation.
Interest Rate Outlook and Derivative Strategies
We expect the National Bank of Poland to keep its benchmark interest rate steady at 3.75% during tomorrow’s monetary policy meeting. While a hold is highly anticipated, we believe derivative traders should prepare for market shifts in the coming weeks as underlying inflation pressures build up. With Poland’s annual inflation rising to 4.0% in September, the current real interest rate remains close to zero, which is unsustainable for the central bank in the medium term.
The Polish government’s current fuel subsidy, which currently shaves about 0.7 percentage points off the headline consumer price index, is set to expire at the end of 2026. Once this intervention ends, we expect inflation to push back toward the upper limit of the central bank’s target range. This looming pressure makes a strong case for two 25-basis-point rate hikes in the first quarter of 2027 to prevent high prices from becoming entrenched.
For those trading interest rate derivatives, we suggest looking at Forward Rate Agreements to position for this upward rate trajectory. Historically, Polish three-month money market rates closely track these policy shifts, and current derivative pricing may still underrepresent the likelihood of a tight turn in early 2027. Locking in higher yields now could prove highly profitable as the market begins to price in these upcoming hikes over the next month.
Currency Implications and Trading Opportunities
In the currency derivative markets, we expect the Polish Zloty to gain strength against the Euro and the US Dollar as hawkish expectations build. Derivative traders can utilize option strategies, such as buying Zloty call options, to capitalize on this potential appreciation over the next few weeks. By entering these positions now, we can stay ahead of the trend before the central bank releases its updated macroeconomic projections in November.
